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Drug shortages: Single supplier for generic injectables at root of crisis in Canada

By Emily JacksonStaff Reporter

Sat., March 17, 2012

Shortages of the painkillers, nausea-relieving drugs and sedatives that inject calm into Canadian hospitals have triggered a nationwide drug crisis.

Politicians, hospitals, physicians and, ultimately, patients are struggling with a scarcity of various injectables, including morphine to ease end of life pain, ondansetron to relieve nausea during chemotherapy and protamine, crucial for heart bypass operations.

Sandoz generic injectable products have been in short supply since a slowdown in production at the company's Quebec plant. (Jacques Boissinot / THE CANADIAN PRESS)

But the supply shock comes as no surprise to the people who buy Canada’s drugs.

Long before Sandoz Canada’s Quebec factory, where most of Canada’s generic injectables are made, slowed its production to meet U.S. Food and Drug Administration standards, and long before a fire briefly shut the plant, the strains on the system have alarmed health-care providers across the country.

Canada has had drug shortages in the past, but this particular problem is huge, said Queen’s University hematologist and cancer clinician Jackie Duffin.

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“It’s way bigger than anything we’ve had before and it’s been going on for two years,” she said.

It’s a classic case of market forces gone awry, and even though Canada appears to be muddling through, it’s not expected to get better any time soon.

This is how it happened.

1) The system is dominated by one supplier

Down the St. Lawrence River from Montreal, just north of the Trans- Canada Highway, in a drab industrial park in Boucherville, is the source of most of Canada’s generic injectable drugs.

Called Sabex before it was purchased in 2004 by Sandoz, the generic branch of Swiss pharmaceutical giant Novartis, the plant produces about 50 per cent of generic injectable drugs used in Canadian hospitals.

Canada’s three major group purchasing organizations depend on it for the majority of these drugs and the stunted production has left them scrambling to find alternatives.

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The heavy reliance on Sandoz stems from fewer companies making these older “workhorse” drugs in the first place, explained Richard Jones, a vice-president at group purchasing organization Medbuy, which represents hospitals in Ontario and New Brunswick for contracts worth more than $760 million.

Of the 225 injectables Sandoz makes, it is the sole Canadian supplier of 140, Jones said. It is, for example, Canada’s only supplier for the entire injectable morphine family.

Many of these generic injectables are preferred by doctors and patients alike, yet dozens will not be available until 2013, according to a supply chart.

Decades ago there was more competition, Jones said, but low prices for generics make the business less appealing to big pharmaceutical companies.

Hospira, an American pharma company, used to supply morphine for the Canadian market, but about 10 years ago it pulled back “completely without notice,” Jones said.

“They didn’t tell anybody until it was too late,” he said. “Overnight all the business moved to Sabex.”

Nobody noticed because Sandoz had the capacity to support the demand, Jones said, but the vulnerability of a single source has become clear in the past few months.

First, the FDA slapped Sandoz on the wrist for failing to adequately prevent contamination at its Quebec plant in November 2011.

(In 2008, contaminated heparin produced in Chinese factories ending up killing people. Since then, the FDA has become more stringent with its inspections.)

Even though the facility passed a fall inspection by Health Canada, Sandoz decided to conform to the U.S. regulations despite the fact that its products are “predominantly” for the Canadian market (Sandoz refused to provide an exact breakdown).

“As part of Novartis, Sandoz applies one Novartis quality standard across the organization, and is committed to ensuring that all plants operate with this one standard consistently,” spokeswoman Monika Sniec wrote in an email.

Then a fire broke out in the boiler room on March 4, completely halting production at the facility before it partially resumed about a week later.

2) We like our drugs (too?) cheap

Ontario’s Ministry of Health requires that generic drugs cost 25 per cent of their brand-name counterparts. Similar price caps (with varying percentages) exist across the country.

Hospitals also band together to drive down the cost of drugs. Three major group purchasing organizations (Medbuy, HealthPRO and SigmaSante) negotiate contracts with drug companies for hospitals. The idea is that buying drugs in bulk results in lower prices.

But these old generic drugs are still expensive to make.

Regulations surrounding narcotics and product safety complicate the process, said Michael Blanchard, a director at HealthPRO, which represents hospitals from 10 provinces and territories for contracts worth more than $1.6 billion.

The lower profit margins make them less desirable to sell in Canada, especially since the Canadian hospital injectable market is very small from a global perspective, Blanchard said.

Because the Quebec manufacturer is owned by a multinational company, it faces pressure to conform to global standards, he added.

“Regulatory processes have become stiffer and more demanding,” Blanchard said. “With low volumes, low margins, all of these other complexities — companies will exit the market.”

Jones agrees that the low prices have forced Canada’s health-care system into its one-supplier situation, which can, ironically, wind up being more expensive than paying more in the first place, Jones said, pointing to the “immense cost” of managing the shortage.

3) No national drug strategy

There is no legislation in Canada forcing drug manufacturers to report when they are expecting a delay in production.

As it stands, drug companies voluntarily notify different players in the health-care system when there might be a back order, a temporary supply reduction or a shortage.

A voluntary reporting process means the list of shortages can be incomplete or inaccurate, Dale said.

While nobody could have predicted the fire at Sandoz, officials say they could have started planning sooner if the company had told them about its plan to comply with the FDA regulations, which it received in November.

The federal government questioned why it didn’t get advance notice of the slowdown.

Health Canada had discussions with Sandoz regarding the FDA letter from late November or early December through to January, said Steve Outhouse, director of communications for federal Health Minister Leona Aglukkaq.

“Their story kept changing,” Outhouse said, explaining that Sandoz at first said it was going to be minor shutdown, then a potential major shutdown and then it was going to be a significant disruption but medically necessary drugs would be protected. “They never gave us their plan.”

The federal government is open to considering mandatory reporting, Outhouse said, but noted that wouldn’t help in the case of a fire or a notice to comply with FDA regulations.

Another approach could have provinces and territories working on their contracts with the drug companies, Outhouse said. Perhaps there could be a financial penalty if a drug company fails to meet standards or deliver goods without providing an alternate source.

The Ontario Ministry of Health agrees.

“Ontario believes the federal government must establish a national reporting system and establish consequences for drug companies who fail to supply the marketplace and/or give adequate notice of supply disruptions,” spokesman David Jensen wrote in an email.

In parliament this week, the Conservatives agreed with an NDP motion demanding a national strategy to manage drug shortages. It’s unclear whether it would be voluntary or mandatory, or if penalties would be introduced.

The organizations say they would provide inventory tracking on a public, bilingual website, develop a system to report anticipated shortages and recommend solutions for unavailable medicines.

All CGPA members already report current and anticipated shortages on public websites, spokesman Jeff Connell wrote in an email.

For now, the government’s priority is to deal with the shortage.

Health Canada has received 23 submissions for drugs to be supplied in Canada. Normally, it can take more than six months for a drug to get approval but, in light of the shortage, Health Canada hopes to shorten the process to about a month.

Of the 23 alternative drugs, 15 are from Sandoz facilities in other countries.

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